As members of Congress seek ways to reduce the federal deficit and pay for a fix to the Sustainable Growth Rate formula, whether temporary or permanent, one of the items frequently on the table as a proposed “pay-for” is the in-office ancillary services, or group practice, exception to the Stark law. The exception is what allows dermatology groups to provide dermatopathology in-house without facing penalties for violating regulations that forbid self-referral within practices. Unfortunately, abuse of this exception by some now threatens its existence for all.

Actuaries have long believed that closing the exception would save the Medicare program money, with varying estimates depending on how such a closure is implemented. The Congressional Budget Office says closing part of the exception would save $1.6 billion over 10 years, while the Office of Management and Budget flips the digits, estimating the closure in the president’s proposed budget for 2014 would save $6.1 billion. Recently, the Government Accountability Office (GAO) gave supporters of closing the exception a boost with a report that became public on July 15 and indicated that when dermatologists, urologists, and gastroenterologists start referring anatomic pathology in-house, they immediately begin referring significantly more pathology to their own practices than they had previously been sending out.

The Medicare Payment Advisory Committee, or MedPAC, which advises Congress regarding Medicare payment policy, has previously suggested that closing the exception is the wrong way to achieve cost savings. It says that such a move could have “unintended consequences, such as inhibiting the development of organizations that integrate and coordinate care within a physician practice.”

The AADA’s policy statement is similar, and notes that closing the in-office ancillary services exception would have a deleterious effect on the ability of dermatologists to provide integrated care to their patients. It would prevent dermatologists from practicing to the full extent of our training, which includes significant residency experience in pathology. And it could have, as MedPAC warns, other unintended consequences, like putting Mohs surgery, which combines surgery and pathology, in a regulatory grey area. It could also make it impossible for dermatologists to offer immediate diagnosis and treatment of some conditions, creating the need for return visits, missed days of work by the patient, and potentially patient discomfort. [pagebreak]

However, if Congress closes the exception, the data suggest that dermatologists may, in part, be culpable. While the GAO report’s methodology was imperfect, its conclusions are all but irrefutable: on average, dermatologists, gastroenterologists, and urologists who brought their pathology in-house during the study period referred more pathology to themselves than they had previously referred out. In aggregate, 918,000 more specimens were read in-house in 2010 by self-referrers than would have been referred out. After searching for any other explanation for this change, the GAO concluded that the financial incentives for self-referring were to blame, and said this behavior cost Medicare an extra $69 million in 2010 alone, not to mention additional co-pays made by patients. What is at risk may be no less than our scope of practice and our right as dermatologists to read slides and run labs.

The AADA issued a strong response to the GAO report, noting that we are “committed to working to ensure that pathology services are utilized in the most appropriate and cost-effective manner.” We call upon all Academy members to evaluate their practices and help us fulfill this commitment. We can, and we must, guarantee that we use pathology services in only the most appropriate and cost-effective manner, which is that which best serves the needs of our patients.

Prior to the release of the GAO report, the push to eliminate the in-office ancillary services exception to Stark had not yet attracted a congressional sponsor. But in its wake, a bill that would close the exception for anatomic pathology, as well as advanced imaging, radiation therapy, and physical therapy, was introduced in the House. It would be a terrible irony for us to finally achieve long-sought Medicare payment stability, only to have it paid for in part by gutting our ability to use the full spectrum of our training to provide the best possible care for our patients. [pagebreak]

Signed by the Officers, Board of Directors (current and incoming), and Board Observers